Transnational Network and Export Control Cooperation in the Nuclear Renaissance. Michael M. Lieberman Remarks

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Esther Freeman
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1 Transnational Network and Export Control Cooperation in the Nuclear Renaissance Michael M. Lieberman Remarks University of Reading, 123 Agreement Project Seminar 17 th November 2011 The recent IAEA report on Iran s suspected nuclear activities brings with it tides of great foreboding. The war with Iraq, triggered by the 9/11 attacks against the backdrop of a similar IAEA report, is only now winding down. The costs in lives lost and broken, in investments at home unmade and in the credibility of the U.S. and its coalition partners, are overwhelming. As is, to many, the blow to international law. For many, the fact that the United Nations did not explicitly approve the Iraq invasion, and that the claim to self-defense was attenuated at best rendered the war illegitimate, even illegal. Others continue to defend UN assent and a preventive self-defense theory, and point out that it was in fact Iraq that led the world to think it had breached its international legal obligations, by developing (and using) WMD in the past and failing to convince the world that it had indeed ceased these efforts. Is Iran the new Iraq? Or are we ignoring a dire threat in drawing the wrong conclusions? Whichever view one takes, the fact that war is again on the lips of our leaders has led many to question the international legal system that was established to prevent such a calamity from recurring. The cornerstone of this system, the Nonproliferation Treaty, has been under strain in recent years. The 1970 NPT, to quickly refresh our recollection establishes a grand bargain -- it divides the world into NWS and NNWS, and commits the latter to refrain from developing nuclear weapons in exchange for assistance from the NWS in civilian nuclear research/development, and for a commitment from the NWS to themselves eventually disarm. It 1

2 also provides that the IAEA will serve as a watchdog, monitoring states production of fissile materials and reporting suspected diversion for weapons programs. The back to back nuclear tests of India and Pakistan in 1998 was a strong sign that not all was well in the world; while neither was party to the treaty, the tests led many to wonder if others might follow suit; in 2003 we got our answer, as North Korea announced its withdrawal from the NPT, and proceeded to undertake two nuclear tests itself several years later; also in in 2003 Libya was revealed to have a fairly advanced nuclear weapons program assisted by the father of Pakistan s nuclear bomb, A.Q. Khan; the unraveling of the Khan network revealed that Khan had also provided assistance to other states, including North Korea (which in turn assisted Syria s program, which began in 2001), and Iran s nuclear program. Suddenly, the world seemed a lot more dangerous. Is the NPT sufficient to prevent this cascade of proliferation? many ask. Even efforts to strengthen it, such as pushing states to enter into more comprehensive IAEA safeguards agreements, seem insufficient. Iran, after all, has entered into one of these Additional Protocols, which provide for expanded declarations of information on a broad set of nuclear related activities, including technically non-nuclear but related activities such as weapon design and trade in dual use goods on the Nuclear Supplier Group trigger list. The APs also allow for inspection/monitoring of activities not involving only nuclear materials if declared in the expanded declaration, including short-notice physical access to all parts of a fuel cycle, from mines to waste sites, and areas outside nuclear-specific facilities; and collection of environmental samples. The IAEA is designed only to alert a job it does well. But knowing is only half the battle. The IAEA s informal Zangger Committee, for instance, was established to identify 2

3 nuclear-related items under Art. III.2 of the NPT that should trigger the requirement of IAEA safeguards to ensure non-diversion of nuclear materials, and maintains a lengthy list of such items. But the NPT, Zangger Committee or IAEA while they play a vital norm-creating and monitoring role cannot themselves prevent the Khans of the world, of which there are many, from plying their trade. A term often used for Khan s little hobby is second-tier proliferation, which refers to the rings of illicit procurement networks established by middling or aspiring nuclear powers or rogue groups such as Al Qaeda that seek to acquire the building blocks of nuclear weapons. Such networks are distinguishable from first tier proliferants, a term that describes states engaged in direct transfers, e.g. NK missile exports to Syria (though they may overlap sometimes). Precisely because they are not themselves state actors, procure their technologies piecemeal and are obscured by the overwhelmingly large and complex world of global commerce, they are particularly difficult to detect. The AQ Khan network is exhibit A here, but it is certainly not alone. Iranian bonyads ( non-governmental foundations), North Korean intelligence agencies, their Syrian counterparts, and who knows who else, are employing sophisticated tricks of the trade to peddle and purchase these dangerous technologies. Iran, hindered by sanctions, is said to employ at least 350 front entities involved in nuclear, missile procurement operating in some 30 countries. Earlier this year, not 10 miles from my home in Washington DC, a Pakistani national pleaded guilty to illegally exporting dual use nuclear goods to Pakistan. The challenges that the NPT regime faces in preventing determined, undeterrable states and nonstate actors from pursuing nuclear weapons through the types of illicit procurement networks used by Khan and his comrades has led to a shift in emphasis toward strengthening the 3

4 enforcement of existing agreements, domestic laws that reflect but also go farther than such arrangements and interdiction of the illicit nuclear trade. These efforts rely less on the traditional instruments of liberal internationalism, and instead to a much greater degree on coalitions of like-minded states. These enforcement mechanisms complement and interact with the NPT to create a nested nonproliferation regime comprised of layers of increasingly fine mesh, tiered from the general and multilateral policy on down to the specific interdiction of persons, goods or funds. The outermost layer, the NPT itself, serves as the superstructure, establishing the fundamental objectives of the regime and enshrining them in binding, universally accepted international law. The IAEA s safeguards and monitoring activities serve a critical information-gathering and monitoring function that can help enforces implement the NPT at a high level (through UNSC sanctions or potentially military force), but is obviously not a police force, and cannot intervene or sanction itself. It also does not provide the operational intelligence necessary to disrupt actual schemes, but through its trade flow monitoring activities, a new function just being stood up in the last several years, it can detect trends that shed light on where to look. Still, for the most part the IAEA writ is limited to its Board of Governors who can refer issues up to an oft-politicized and frequently deadlocked Security Council. Undergirding this superstructure are international export control cartels such as the Nuclear Suppliers Group. The NSG plays a role similar to the Zangger Committee in that it identifies sensitive nuclear-specific or dual use items that should be restricted; but the NSG is a voluntary grouping of sovereign states that develop policies and implement them; it is also broader in 4

5 membership and coverage, and because it is comprised of the advanced nuclear states, that together possess an incomplete but still meaningful monopoly on nuclear technologies, it can deny nuclear/du technologies to states that do not meet its criteria. In practice, however, the NSG is incapable of serving as a firewell against proliferation because of the varying interests of its members and the differing levels of rigour of the member states export control regimes. Being entirely voluntary and operating by consensus, the NSG does not always march to the same tune, nor feature a consistent level of capacities across its ranks. The member states also share information with the IAEA and sometimes even with each other inconsistently, for example denials of export licenses. There have also been allegations of improper undercutting, despite a proscription against doing so, and inconsistent efforts to prevent forumshopping. The NSG s closely-related sister regime, the MTCR, faces similar issues. Further filling in the gaps left behind by these regimes, UNSC Resolution 1540 of 2004 is a universally applicable mandate on UN member states under the Council s Chapter VII enforcement authority. UNSC 1540 calls on all UN member states to pass effective domestic export control legislation, and invites advanced states to provide assistance and capacity-building to those states requesting it. Here the mesh gets finer, as states are called on to develop the robust export control regulations and procedures necessary to implement higher-level policies, such as those developed by the NSG. The assistance provision of 1540 is vital. Many states serving as major transshipment hubs or as emerging nuclear suppliers who are in especially dire need of advanced export control regimes have only rudimentary elements of one. Consider India, whose regime is not on net bad at all for example, and whose supposedly impeccable record was a major reason for granting it the NSG exemption and the 123 agreement. Consider that: 5

6 i. Recently the subsidiary of a major Indian multinational settled charges brought by the U.S. Bureau of Industry and Security for exporting specialized aluminum products to China, Malaysia, Singapore and other locations without the required license, and for submitting allegedly misleading export declarations. ii. The Inspector General of the U.S. Department of Commerce has issued a report recommending that dual-use exports to India be more closely scrutinized, citing questions over its implementation of several export controlrelated commitments and the difficulty of verifying the end use of sensitive items exported to India. iii. Numerous other cases against U.S. entities and Indian entities have been brought by U.S. authorities for infractions related to improperly handled nuclear-related export transactions, resulting in monetary fines, export privilege revocations and prohibitions on exporting products to them. iv. As an ISIS report observed: Proliferant states are known to target Indian industries. But even the most well-resourced and aggressive domestic export control regime will face challenges in a world where supply chains are becoming longer and more complex, where technological expertise is more diffuse and where the scale of trade obscures illicit transactions. Would-be proliferators, moreover, are adapting to these developments. Whereas proliferation primarily used to feature middlemen serving as brokers, now proliferators are organizing supplier networks, marketing nuclear capabilities and even manufacturing their own components. 6

7 In doing so they are working through a seemingly impenetrable array of freight forwarders, front companies and organizations, legitimate brick and mortar businesses, fictitious end users, corruptible border guards, offshore financial centers, religious groups, and expatriate networks to identify suppliers of goods and circumvent national level export controls. These illicit procurement networks will find even greater opportunities as the nuclear renaissance unfolds, resulting in a vast expansion of the world s nuclear industrial base and a concomitant rise in legitimate nuclear trade. Some estimates of the so-called nuclear renaissance foresee some 350 plants built in the next two decades in some 60 countries. And this is but a subset of a vastly larger volume of industrial trade unrelated to nuclear energy or weapons, since many items with nuclear applications are versions of common industrial products. The risks inherent in this heightened trade will be exacerbated by emerging nuclear states that seek to become suppliers themselves, e.g. India, and whose industrial capabilities are often expanding faster than their ability, or will, to regulate them articulates the underlying idea, but other, more informal modes of cooperation are said to contribute far more to the goal of enhancing enforcement capacities. These efforts track what 1540 calls on states to do, but often precede and are conducted outside of the formal 1540 matching process by states such as Japan, Australia, the U.S. and others. In the course of these activities, and partly as a result of the relationships developed, agencies enter into formal and informal understandings, practices and procedures relating to their responsibilities. These allow them not only to implement but in some circumstances to augment the multilateral agreements reached by their respective governments. Such cooperation can involve such things as trainings in commodity identification, discussion of legal principles, administrative capacity-building, 7

8 investigative techniques, proliferation-finance consultations and similar joint endeavors can result in increased harmonization, the dissemination of best practices, information exchange and organizational relationship-building activities. An example of this is the State Department s initiatives under the Office of Export Control Coordination, which sets up collaborative engagements between the U.S. border control authorities and their counterparts in notorious transshipment points such as Malta or Malaysia. This mode of cooperation exemplifies the promise of what Anne Marie Slaughter has called the promise of transnational regulatory and enforcment networks featuring elements of the disaggregated state the idea that states can usefully be viewed as consisting of multiple functional units addressed to a particular set of issues, and that these units are increasingly interacting with their counterparts abroad to face common threats such as illicit nuclear procurement networks. At their best, such cooperative endeavors begin with shared objectives and professional mandates, and develop to include informal cooperative relationships that can heighten the trust and familiarity that is often necessary for enforcement action involving crossborder trade. There is precedent for such cooperation yielding tangible results in terms of influencing sub-state actors, for example the U.S. FBI and DEA in the drug war, where they convinced their European counterparts to use previously anathema tactics such as roll-ups, plea bargains, reduced charges, and undercover stings. 8

9 As we consider the best way to enhance our cooperative efforts with other states, we must consider the incentives that they and/or their enforcement agencies may have to strengthen their EC enforcement capacity. Potential Incentives for States include: Commitment to nonproliferation Professional development generally Diplomatic pressure Threat of sanctions Bureaucratic influence/resources Trade benefits Donation of equipment/grants Cost-effective enforcement: Ease of system important - ECR a good step in this direction It is also widely recognized that industry is on the front line of these efforts and seen as critical to enlist as sources of information. Business receive suspicious inquiries, have industry knowledge; know players, know items, and can share vital intelligence with states and international institutions such as the WCO and the IAEA s trade and technology analysis unit. In addition to having states on board, it is vital that industry be incentivized to be cooperative as well. Some potential ways include: o Commitment/reputation o Agency transparency/involvement with industry o Trusted sender/shipper status o Sanctions o Ease of sharing o Cooperation credit o Trade facilitation o Insurance With this more complete picture in mind, it also makes sense to consider how to make our counterproliferation efforts as efficient as possible. While we cannot afford to skimp on funding initiatives combating WMD proliferation, in an age of budgetary austerity, we must 9

10 consider how to be most efficient and harness each institution s comparative advantages. Which institutions are best for what? WCO trade analysis v. IAEA for trade database? Coordinating requests via 1540 Committee v. energetic bilateral efforts? Roles for each? In a world where global threats transcend any one state s ability to address them, and in which political deadlocks, power struggles, disparate interests and varying capacities hinder traditional modes of liberal internationalism, the future thrust of international law may for many issues lie here at these bottom rungs of the nonproliferation regime, which can potentially offer a lot of bang for the buck. 10

Summary of Policy Recommendations

Summary of Policy Recommendations 192 Summary of Policy Recommendations Chapter Three: Strengthening Enforcement New International Law E Develop model national laws to criminalize, deter, and detect nuclear